TAXING THE TAX

Evening Post, Volume CXV, Issue 121, 25 May 1933, Page 10

TAXING THE TAX

An anomaly so glaring as lo be absurd has been revealed as the result of inquiries into the collection of the unemployment emergency charge on income other than wages. Stamp duty of 10 per cent, is levied on interest from Government and local body loans and the amount of the duty thus paid may be claimed as a special exemption for income lax purposes. This is reasonably fair, though not wholly so, as the gross amount of interest (without deduction) must be returned and will, presumably, be reckoned in arriving at the rate of income tax to be levied and also in determining the amount of individual income over £500 subject to the special tax of fourpence in the pound. But this injustice becomes insignificant when the position of the unemployment emergency charge is considered. In returns of income for this purpose the gross income is to be reckoned. That is to say, though the stockholder has had his interestreduced by 10 per cent., he is taxed as if he had suffered no reduction. He is taxed on his taxation. We cannot imagine that this has been done deliberately, even though interest reduction and taxation measures abound in anomalies. It is evidently the result of an oversight due to the rushing" of legislation with such haste that little attention is given to details and less to principles. The stamp duty is a simple reduction of interest, on the sahie lines as ..the direct reduction of private interest and rent made 'simultaneously; It was called stamp duty to avoid the' appearance of a flagrant breach of contract which an outright reduction would have involved—a pretence which was surely unnecessary in the light of subsequent events. But there is no justification whatever for keeping up the pretence now to the length of professing that the . bondholder really receives the full amount of interest stated on the warrant and lax* ing him as if he did. That is the most' irritating form. of double taxation that could be conceived. Parliament is not sitting now and cannot therefore remove the anomaly immediately, but as returns are now being made and first instalments of tax being collected it would simplify matters if the Acting-Prime Minister were to issue an instruction that the deduction of stamp duty should be allowed. When Parliament meets 'this' could be ratified by legislation without all the confusion resulting from demands for refunds.